In October 2010 AMK integrated the work of the Special Interest Group Unit (SIGU) into its Urban Operations Team.

Since its inception in 2009, SIGU has successfully built strong partnerships with NGOs and aftercare organisations based in Phnom Penh. Through SIGU, AMK provided a service to vulnerable clients who would otherwise have found it very difficult to access microfinance. What became increasingly apparent during discussions with NGOs and clients, however, was that in order to reach larger numbers of potentially underserved people in Phnom Penh, it was necessary to significantly expand the scope of the project by designing a specific product for the urban poor.

Despite impressive rates of economic growth over the last decade in Phnom Penh, the urban poor still comprise a significant section of the population of the city. According to the NGO Sahmakum Teang Tnaut, there are 40,548 urban poor families in the city (STT, 2009). Conditions in the 410 urban poor settlements are incredibly diverse; in some settlements homes are reasonably permanent and secure and the residents have regular, although low-paid incomes, and access to utilities such as water and electricity. In other settlements, however, homes are constructed mainly from salvaged materials, household incomes are both very low and insecure, and access to utilities is limited and expensive. Settlements are often located in areas prone to flooding, along rivers and railway lines, and in resettlement sites on the outskirts of the city. In recent weeks regular downpours have left many of our urban clients struggling to cope with flooded homes and damaged property.

Although many Microfinance Institutions already work in Phnom Penh, the depth of coverage is the second lowest by Province in Cambodia (The Cambodia Microfinance Association, 2010). Most MFIs require collateral and provide loans which are comparatively large in size.

In June 2010 AMK embarked on the process of product design. We conducted market research in urban poor settlements and analysed client preferences. The Product Development Department then set to work to devise a flexible product for clients with diverse occupations and loan usage requirements. The objective was to build a product that was as inclusive as possible that could suit the needs of existing SIGU clients, as well as reach a broader target client group living in slums, informal settlements and low-cost rental accommodation.

Specific challenges associated with working with this client group include a lack of formal documentation, proof of identification or collateral, difficulties in obtaining information about a client’s background and credit history, and an increased likelihood of sudden migration or eviction. Relying heavily on Guarantors to secure the loans and placing a strong focus on accurate assessments of clients’ income and repayment capacities, AMK aims to successfully promote financial inclusion amongst the poorest and most vulnerable urban clients, while at the same time mitigating the risk of default.

The pilot product (named ‘Loan for our Family’ in Khmer) was launched in late August 2010. The pilot test will last for four months and is currently operating in 3 Districts of the city; Russei Keo, Meanchey and Dangkor. While we are continuing to work through our partner NGOs and receive referrals from them, we are also targeting urban poor clients directly in their homes and workplaces.

Initial responses from community leaders and potential clients have been encouraging. We are closely monitoring the pilot phase and are modifying the product based on feedback from clients and Field Staff. In 2011 AMK hopes to expand this credit product to all eight Districts in Phnom Penh and to other cities around Cambodia.

As the global recession picked up, we noticed our PAR (portfolio at risk) rates creep up as the sources of income which clients had previously been able to rely on slowly dried up. More and more clients have been put in a position where they are unable to pay back their loans on time. At AMK we noticed that our delinquency problems were concentrated in certain villages. This put us in a unique position to help our over indebted clients in a relatively efficient manner. If we could come up with a plan to help these villages, we could lower our PAR rates without resorting to pressuring our clients to sell their land or houses as we have seen other MFIs do over the last year.

Recently we launched a Delinquent Client workout program where we hire teachers to train our clients to make sellable goods. We provide them with an additional loan, which we call a workout loan, to purchase equipment such as sewing machines. Then our trainer teaches them to make quality goods. We provide them with the material and they get paid on a per-piece basis.

Luckily for us, an AMK employee, Sanjaya Punyasena, has been working on a side-project Ahkun.org. Ahkun.org is a website which sells goods make by recipients of microloans that have been funded on Kiva.org. With the blessing of our board, AMK will partner with Ahkun to sell the goods made by these delinquent clients on the website. Normally, AMK receives 25% of the profits sold on the site, but we are going to give that 25% to the clients so that they will receive 50% of the profits. They will use that money to pay off their loans.

For us to stay in business we need to collect the money that we lend. This strategy gives clients the opportunity to work out of their situation.

We hope that you will support us in this venture. Look out for products made by our clients on ahkun.org.

In the 2009, MIX Global 100 Composite rating, AMK was the top ranked MFI in Cambodia and #16 in the world based on outreach, efficiency and transparency. AMK was rated #1 in Cambodia for the third year in a row and is one of only two organizations who finished within the top 20 worldwide for the last three years.

The other four MFIs and Bank in Cambodia are AMRET was in 2nd place in Cambodia and 48th in the world, VFC was in 3rd place in Cambodia and 51th in the world, TPC was in 4th place in Cambodia and 54th in the world, and finally ACLEDA was in 5th and 95th in the world.

For the third year running, MIX presented its Composite Ranking of the performance of 955 MFIs from over 100 different countries. Based on data published on MIX Market, the MIX Global 100 Composite Ranking attempts to provide a composite picture of all the MFIs based on specific attributes related to measuring outreach, efficiency, and transparency.

AMK is a financially sound institution with the mission of “helping large numbers of poor people to improve their livelihood options through the delivery of appropriate and viable microfinance services”. It is expanding outreach to clients at the lowest possible cost, and doing it in the public arena so that others may learn from the experience.

AMK currently provides financial services covering the whole country, serving more than two hundred and twenty two thousand (220,000) clients with a loan portfolio of almost twenty five millions US dollars ($25,000,000).

AMK received a license from the National Bank of Cambodia to take deposits from the general public and now is offering some of the best rates in the country.

AMK is an innovative leader in the microfinance industry. Several creative projects are underway and this blog post will feature one in particular: the Special Interest Group Unit (SIGU). SIGU was developed as an initiative to further reflect AMK’s mission, and to serve more ‘vulnerable’ groups that are currently underserved by microfinance services. These vulnerable groups include women who are victims of trafficking, domestic violence and other gender-based traumas, people living with HIV/AIDS, street people and children and people with disabilities.

AMK is currently focusing on assisting women who are victims of trafficking, domestic violence and other gender-based traumas. Current SIGU projects include developing microfinance specific financial literacy training and creating a pilot credit program specific to this population. AMK is not aware of any other MFI in the world that has demonstrated a commitment to this challenging client base.

AMK is looking to partner with after-care organizations that incorporate vocational training initiatives as a part of the reintegration process. For the subset of clients that wish to start their own businesses, AMK can administer a small loan program which will provide the necessary start-up capital for these entrepreneurs. A partnership approach to a credit pilot with an after-care organization is essential to ensure that the client is being supported emotionally as well as financially. SIGU’s first official partner is with Hagar Cambodia (http://www.hagarcambodia.org/), and additional partnerships are in the works.

AMK is also designing a training seminar to complement the existing financial education provided by after-care organizations. The goal of this training is to provide clients with accurate information about microfinance and to help familiarize clients with terminology and concepts that will benefit them in the future whether or not they ever take a loan from a microfinance bank.

On 1st August 2009, the AMK Special Interest Group (SIGU) was selected as a new partner for the Sorenson / Unitus Ultra Poor Initiative. The goal of the Sorenson / Unitus Ultra Poor Initiative (“UPI”) – a joint initiative between the Sorenson Legacy Foundation and Unitus, Inc. – is to stimulate the microfinance industry to design and deliver products and services that sustainably elevate the ultra poor to a higher standard of living. UPI partners receive hands-on technical assistance, strategic guidance, and funding either to initiate new ultra poor programs or to accelerate the growth and efficacy of existing programs. The UPI does not endeavor to launch its own ultra poor program, nor does it endorse one particular operating model or philosophy; rather, it exists to promote and execute diverse solutions to reach and serve the critical needs of the poorest of the poor. AMK is very grateful for generous financial and technical support provided by Unitus. Additional fundraising initiatives are under way.

I would like to personally welcome you to the new AMK blog. Many exciting things have been happening here at AMK and we wanted to use this blog to let you know all about it. On this blog you can look forward to reading all about:

The state of AMK and microfinance in Cambodia

Our new initiatives that go beyond microfinance

The challenges that AMK faces and how we are addressing them

Inspiring stories about our clients

New partnerships we are forming to maximize our impact and improve the livelihoods of our clients

All about our milestones

Since this is the first post, let me use this opportunity to give you a sense of AMK’s current state of affairs. AMK has grown to 200,000 active clients and we are the first microfinance institution to operate in every province in Cambodia. We have been the recipients of numerous awards for social performance, financial transparency and our contributions to Microfinance in Cambodia.